Implementation and Social Influence

Hitoshi Matsushima

No CARF-F-140, CARF F-Series from Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo

Abstract: This paper incorporates social psychology into implementation theory. Real individuals care not only about their material benefits but also about their social influence in terms of obedience and conformity. Using a continuous time horizon, we demonstrate a method of manipulating the decision-making process, according to which, an uninformed principal utilizes her/his power of social influence to incentivize multiple informed agents to make honest announcements. Following this method, we show that with incentive compatibility, the principal can implement any alternative as she/he wishes as the unique Nash equilibrium outcome, even if her/his power is limited and no contractual devices are available.

Pages: 35 pages
Date: 2008-10
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Working Paper: Implementation and Social Influence (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:cfi:fseres:cf140

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